© Reuters. View of a branch of the Commonwealth Bank of Australia in Sydney, Australia April 18, 2018. REUTERS/Edgar Su
By Himanshi Akhand
(Reuters) – Commonwealth Bank of Australia’s first-quarter cash profits were largely unchanged on Tuesday, but the lender’s home loan balances declined as it focused on increasing its revenue share in the competitive mortgage market in the country.
Although rate hikes since last year have boosted interest income and margins for Australian banks, rising repayment costs have intensified competition in the home loan market, capping profit margins and hampering growth. credit.
Australia’s largest lender said its net profit after tax was A$2.50 billion ($1.59 billion) for the quarter ended September 30, the same as the previous year. This compares to a consensus estimate of A$2.45 billion, according to Citi.
CBA’s home loan balances decreased by A$4.5 billion during the quarter.
“This reflects a disciplined approach to pricing that ensures that marginal returns to shareholders remain above the cost of capital in a highly competitive market,” the lender said.
Net interest margin declined during the quarter, mainly due to continued competitive pressure on deposits and customers’ shift to higher yielding deposits, CBA added.
“Our customers continue to take practical steps to navigate a period of tightening household finances…As a result, we have seen a slight increase in consumer arrears over the past few months,” CEO Matt Comyn said in a communicated.
CBA dominates Australia’s A$2 trillion mortgage sector, which has benefited from a property boom thanks to COVID-19 restrictions.
But the growing cost of living crisis, amid the recent rise in interest rates, has put a strain on customers. This prompted Australia’s “big four” banks to start offering cash payments for mortgage refinancing to attract borrowers. But the CBA was the first among its peers to end the practice earlier this year.
CBA’s rivals National Australia Bank (OTC:), Westpac and ANZ Group all posted higher annual profits earlier this month despite inflationary headwinds.
($1 = 1.5676 Australian dollars)